28 October 2009
Thousands of Sr. Citizens who have invested in post offices under Senior Citizen Saving Scheme 2004, are now facing a problem of compulsory deduction TDS on interest they earned under the scheme for the financial years 2004-05 ,2005-06 and 2007-08 from their principal amount on maturity from FY 2009-10. They have been asked to produce Xerox copies of income tax returns for financial years 2004-05 onwards.
In case of the persons whose gross income in all these financial years was below taxable limit is the main sufferer. Because his 15-G forms was not accepted by post office till the financial years 2006-07 because then post officials were under impression that TDS was not applicable on interest earned from post offices.
The post office ( Mumbai GPO) has now started deducting TDS for these years from the principal amount of deposit and is issuing TDS certificates which may not be accepted by income tax authorities for A.Y.2010-11 onwards. The post office is also not ready to accept 15-G form for these previous years 2004-05,2005-06 and 2006-07 from them.
A copy of the letter addressed to all Sr. Citizens whose accounts are maturing in the current year, is produced below for information,
Please suggest me the specific provision in income tax act or rules, circular, tribunal decision or even court judgement in the matter which i think i can show to the postal official to sort out the issue.
Copy...... DEPARTMENT OF POSTS INDIA OFFICE OF THE DIRECTOR MUMBAI GPO 400001
To
No DDSB/SCSS/TDS/09-10 Dated at MBI GPO …….the 09/2009.
Sub: TDS Deduction on Senior Citizen Saving Scheme Since introduction of Scheme,
Sir/Madam, With reference to the subject cited above, as your Sr. Citizen Saving Scheme account no…………………. standing at Mumbai GPO and maturing on …………………. , it is to intimate you as under
Govt. of India, Ministry of Finance vide letter no. 2-8/2004/NS/II dated 28/03/2006 clarified that interest payments under SCSS-2004 is not exempted from deduction of Tax at source .Further it is clarified vide letter no. 2-8/2004/NS/II dt. 6/6/09 stating that TDS would be applicable from very first day of Sr. Citizen Scheme was made operational. Therefore, Tax deduction at source is mandatory from the interest if the amount of interest exceeds Rs.5,000/- (Rs.10,000 wef 1.6.2007) in the financial year.
Therefore , in case if you desire to avoid exemption from TDS on interest accrued on the date of maturity, kindly furnish Xerox copies of Income Tax Returns filed with Income Authorities for the year 2004-05,2005-06,2006-07 and onwards if applicable, else Income Tax under TDS shall be deducted from the maturity amount and TDS Certificate will be issued.
Your kind co-operation is therefore solicited.
Thanking you Yours faithfully S/d Mumbai GPO 400001.
29 October 2009
As per the income tax law TDS is to be deducted on source of income in every financial year. TDS could not be deducted by Post Office on earlier year income. Post Office can deduct TDS only on currnet year interest income.
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